Motilal Oswal's research report on Avenue Supermarts
Revenue/sq. ft. has been sluggish (-8% CAGR) over the last three years. The management sees little cause for concern as the Mass Discretionary segment (27% of revenue) is yet to fully recover. It appeared optimistic that high bill values have partly compensated for the lower footfalls and cut in bill sizes. The higher store size has pulled down revenue productivity, but it gives DMART an opportunity to increase product offerings to the mass value customer, thus increasing its wallet share. It also offers a longer term growth visibility. Being on an ownership model, the lower revenue/sq. ft. in the initial period is less concerning as the benefits of long-term high ROIC far outpace the lower throughput.
We are cognizant of the prominence of new-age grocery models, rich valuations, and weak revenue/sq. ft. over the last few quarters. Subsequently, we maintain our Neutral rating with a TP of INR3,740.
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